NEW YORK, July 27, 2017 /PRNewswire/ -- AllianceBernstein
L.P. ("AB") and AllianceBernstein Holding L.P. ("AB Holding") (NYSE: AB) today reported financial and operating results for the
quarter ended June 30, 2017.
"It's clear that I've joined AB at an exciting point in the firm's long-term strategic and competitive transition," said
Seth P. Bernstein, President and CEO of AB. "AB's momentum accelerated in the second quarter, with
11% year-on-year gross sales growth, active net inflows of $6.6 billion that were positive across
all three client channels, 270 points of adjusted operating margin expansion and 26% growth in adjusted earnings per unit."
(US $ Thousands except per Unit amounts)
|
2Q 2017
|
|
2Q 2016
|
|
2Q 2017 vs
2Q 2016 %
Change
|
|
1Q 2017
|
|
2Q 2017 vs
1Q 2017 %
Change
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP Financial Measures
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
802,313
|
|
|
$
|
725,806
|
|
|
10.5
|
%
|
|
$
|
764,917
|
|
|
4.9
|
%
|
Operating income
|
$
|
162,537
|
|
|
$
|
142,575
|
|
|
14.0
|
%
|
|
$
|
166,312
|
|
|
(2.3)
|
%
|
Operating margin
|
18.1
|
%
|
|
19.0
|
%
|
|
(90 bps)
|
|
19.6
|
%
|
|
(150 bps)
|
AB Holding Diluted EPU
|
$
|
0.43
|
|
|
$
|
0.40
|
|
|
7.5
|
%
|
|
$
|
0.46
|
|
|
(6.5)
|
%
|
|
|
|
|
|
|
|
|
|
|
Adjusted Financial Measures (1)
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
649,541
|
|
|
$
|
603,899
|
|
|
7.6
|
%
|
|
$
|
623,772
|
|
|
4.1
|
%
|
Operating income
|
$
|
162,326
|
|
|
$
|
134,816
|
|
|
20.4
|
%
|
|
$
|
150,584
|
|
|
7.8
|
%
|
Operating margin
|
25.0
|
%
|
|
22.3
|
%
|
|
270 bps
|
|
24.1
|
%
|
|
90 bps
|
AB Holding Diluted EPU
|
$
|
0.49
|
|
|
$
|
0.39
|
|
|
25.6
|
%
|
|
$
|
0.46
|
|
|
6.5
|
%
|
AB Holding cash distribution per Unit
|
$
|
0.49
|
|
|
$
|
0.40
|
|
|
22.5
|
%
|
|
$
|
0.46
|
|
|
6.5
|
%
|
|
|
|
|
|
|
|
|
|
|
(US $ Billions)
|
|
|
|
|
|
|
|
|
|
Assets Under Management
|
|
|
|
|
|
|
|
|
|
Ending AUM
|
$
|
516.6
|
|
|
$
|
489.5
|
|
|
5.5
|
%
|
|
$
|
497.9
|
|
|
3.8
|
%
|
Average AUM
|
$
|
507.7
|
|
|
$
|
484.5
|
|
|
4.8
|
%
|
|
$
|
491.2
|
|
|
3.4
|
%
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The adjusted financial measures are all non-GAAP financial measures. See
page 11 for reconciliations of GAAP Financial Results to Adjusted Financial Results and pages 12-13 for notes describing
the adjustments.
|
Bernstein continued: "AB's strategy to maintain a laser focus on investment performance, broaden our global presence,
consistently deliver relevant services to our clients and remain vigilant in improving our financial position is the right one,
and after years of relentless execution, our steady progress is coming through in the results. Investment performance remains
stellar across the fixed income franchise and equity track records keep trending upward. In Retail, gross sales remained at
record levels during the quarter, driven by strength in our preeminent Asia ex Japan fixed income franchise, where first half gross sales increased 65% year-on-year and net flows totaled
more than $4 billion. In Institutional, we were pleased to see a recovery in activity levels from
the first quarter. Gross sales rose 60% sequentially and inflows of $1.2 billion returned to
positive territory. We're particularly encouraged by the positive trend in our pipeline fee rate. We're winning more mandates in
higher fee areas like commercial real estate debt and concentrated active equities - demonstrating the success we've had in
diversifying our product set. As a long-time personal client, I knew the Bernstein Private Wealth business well coming in, but I
didn't fully appreciate how effective we've been in recent years in appealing to larger and more sophisticated clients with our
offering. The suite of targeted services, which has $5.5 billion in commitments today, has been
instrumental in this effort. On the sell side, I was well aware coming in of Bernstein's reputation for differentiated
institutional research. Now I see how well this business is navigating shrinking trading volumes and fee compression in the US
and the MiFID II rollout in Europe, while expanding our research and trading presence in
faster-growing international markets. Finally, AB has done impressive work to improve our financials, in particular continuing a
five-year trend of margin expansion so far in 2017. The second quarter adjusted margin of 25% was up 270 bps year-on-year, and
adjusted earnings per unit of $0.49 were up 26%."
Bernstein concluded: "Spending time with my new colleagues here has confirmed what I knew coming in: AB is full of brilliant
and talented people who are striving to deliver for clients - and succeeding in creating better outcomes for them. It's an honor
to be at the helm of such a great firm, and I'm looking forward to doing what I can to build upon AB's success from here."
The firm's cash distribution per unit of $0.49 is payable on August 24,
2017, to holders of record of AB Holding Units at the close of business on August 7,
2017.
Market Performance
US and global equity and fixed income markets were higher in the second quarter. The S&P 500's total return was 3.1% in
the second quarter and the MSCI EAFE Index's total return was 6.4%. The Bloomberg Barclays US Aggregate Index returned 1.4%
during the second quarter and the Bloomberg Barclays Global Aggregate ex US Index's total return was 3.5%.
Assets Under Management ($ Billions)
Total assets under management as of June 30, 2017 were $516.6
billion, up $18.7 billion, or 3.8%, from March 31, 2017, and
up $27.1 billion, or 5.5%, from June 30, 2016.
|
Institutional
|
|
Retail
|
|
Private Wealth
Management
|
|
Total
|
Assets Under Management 6/30/17
|
$252.9
|
|
$177.3
|
|
$86.4
|
|
$516.6
|
Net Flows for Three Months Ended 6/30/17
|
$1.2
|
|
$3.2
|
|
$0.3
|
|
$4.7
|
Total net inflows were $4.7 billion in the second quarter, compared to net outflows of
$0.2 billion in the previous quarter, and net inflows of $3.5 billion
in the prior year period.
Net inflows to the Institutional channel were $1.2 billion, compared to net outflows of
$1.9 billion in the prior quarter. Institutional gross sales of $4.0
billion increased 60% from the first quarter's $2.5 billion. The pipeline of awarded but
unfunded Institutional mandates increased sequentially from $4.2 billion to $4.6 billion at June 30, 2017.
The Retail channel experienced second quarter 2017 net inflows of $3.2 billion, compared to
$1.6 billion of net inflows in the prior quarter. Retail gross sales of $13.5 billion were flat compared to the first quarter.
In the Private Wealth channel, net inflows of $0.3 billion compared to $0.1 billion of net inflows in the prior quarter. Private Wealth gross sales of $2.9
billion decreased 3% from the first quarter's $3.0 billion.
Second Quarter Financial Results
We are presenting both earnings information derived in accordance with accounting principles generally accepted in
the United States of America ("US GAAP") and non-GAAP, adjusted earnings information in this
release. Management principally uses these non-GAAP financial measures in evaluating performance because they present a clearer
picture of our operating performance, and allow management to see long-term trends without the distortion caused by long-term
incentive compensation-related mark-to-market adjustments, real estate consolidation charges/credits and other adjustment items.
Similarly, we believe that this non-GAAP earnings information helps investors better understand the underlying trends in our
results and, accordingly, provides a valuable perspective for investors. Please note, however, that these non-GAAP measures are
provided in addition to, and not as substitutes for, any measures derived in accordance with US GAAP and they may not be
comparable to non-GAAP measures presented by other companies. Management uses both US GAAP and non-GAAP measures in evaluating
our financial performance. The non-GAAP measures alone may pose limitations because they do not include all of our revenues and
expenses.
AB Holding is required to distribute all of its Available Cash Flow, as defined in the AB Holding Partnership Agreement, to
its Unitholders (including the General Partner). Since the third quarter of 2012, Available Cash Flow has been the adjusted
diluted net income per unit for the quarter multiplied by the number of units outstanding at the end of the quarter. Management
anticipates that Available Cash Flow will continue to be based on adjusted diluted net income per unit, unless management
determines with concurrence of the Board of Directors that one or more of the non-GAAP adjustments that are made for adjusted net
income should not be made with respect to the Available Cash Flow calculation.
US GAAP Earnings
Net revenues of $802 million increased 11% compared to the second quarter of 2016 due to higher
investment advisory fees, investment gains, dividend and interest income and distribution revenues, partially offset by lower
Bernstein Research revenues. Sequentially, net revenues increased 5% due to higher investment advisory fees, dividend and
interest income and distribution revenues, partly offset by lower Bernstein Research revenues. Bernstein Research revenues
decreased 5% year-over-year and 3% sequentially, in both cases predominantly the result of a decrease in client activity in the
US and Europe, which were only partially offset by gains in Asia.
Operating expenses were $639 million for the second quarter of 2017, up 10% year-over-year, due
to higher total employee compensation and benefits, promotion and servicing and general and administrative ("G&A") expenses.
Total employee compensation and benefits expenses increased as a result of higher severance charges. Within promotion and
servicing, higher distribution related payments were partially offset by lower amortization of deferred sales commissions and
transfer agency fees. Within G&A, higher technology in addition to expenses related to our consolidated company-sponsored
investment funds drove the increase. During the second quarter of 2017, we recorded a $20.7 million
non-cash real estate charge compared to a $2.8 million non-cash real estate credit in the second
quarter of 2016.
On a sequential basis, operating expenses were up 7% due to higher total employee compensation and benefits, promotion and
servicing and G&A expenses. The increase in total employee compensation and benefits expenses was due to higher severance
charges, partially offset by lower incentive compensation, commissions and fringes. The increase in promotion and servicing
expense was due to higher distribution related payments and marketing expense. Within G&A, the increase was driven by higher
technology in addition to expenses related to our consolidated company-sponsored investment funds. The $20.7 million non-cash real estate charge during the quarter compares to a de minimus non-cash real estate
credit in the first quarter of 2017.
Operating income of $163 million for the second quarter of 2017 increased 14% from $143 million for the second quarter of 2016 and decreased 2% from $166 million in
the first quarter of 2017.
Diluted net income per Unit for the second quarter of 2017 was $0.43 compared to $0.40 in the second quarter of 2016 and $0.46 in the first quarter of 2017.
Non-GAAP Earnings
This section discusses our second quarter 2017 non-GAAP financial results, as compared to the second quarter of 2016 and the
first quarter of 2017. The phrases "adjusted net revenues", "adjusted operating expenses", "adjusted operating income", "adjusted
operating margin" and "adjusted diluted net income per Unit" are used in the following earnings discussion to identify non-GAAP
information.
Adjusted net revenues of $650 million were up 8% compared to the second quarter of 2016 due to
higher investment advisory fees, partially offset by lower Bernstein Research revenues and higher net distribution expense.
Sequentially, adjusted net revenues were up 4%, driven by higher investment advisory fees, partially offset by slight investment
losses compared to investment gains during the prior quarter, lower Bernstein Research revenues and higher net distribution
expense.
Adjusted operating expenses were $487 million for the second quarter, up 4% from the prior-year
period due to higher total employee compensation and benefits, G&A and interest expenses, partially offset by lower promotion
and servicing expense. Total employee compensation and benefits expenses increased as a result of higher severance charges,
partially offset by lower incentive compensation. Within G&A, technology expenses were up. The decrease in promotion and
servicing was driven by lower travel and entertainment expense.
Sequentially, adjusted operating expenses were up 3%, driven by higher total employee compensation and benefits, promotion and
servicing and G&A expenses. The sequential increase in total employee compensation and benefits expenses was driven by higher
severance charges, partially offset by lower incentive compensation, commissions and fringes. Within promotion and servicing, the
increase was driven by higher marketing expenses. The increase in G&A was due to higher technology expenses.
Adjusted operating income of $162 million increased 20% from $135
million for the second quarter of 2016, and the adjusted operating margin increased 270 basis points to 25.0% from 22.3%.
On a sequential basis, adjusted operating income increased 8% from $151 million, and the adjusted
operating margin increased 90 basis points from 24.1%.
Adjusted diluted net income per Unit of $0.49 was up from $0.39 in
the second quarter of 2016 and $0.46 in the first quarter of 2017.
Headcount
As of June 30, 2017, we had 3,454 employees, compared to 3,466 employees as of June 30, 2016 and 3,436 employees as of March 31, 2017.
Unit Repurchases
During the three and six months ended June 30, 2017, we purchased 4.3 million and 5.7 million AB
Holding Units for $96.7 million and $127.8 million, respectively (on
a trade date basis). These amounts reflect open-market purchases of 3.7 million and 4.9 million AB Holding Units for $82.4 million and $110.3 million, respectively, with the remainder relating to
purchases of AB Holding Units from employees to allow them to fulfill statutory tax withholding requirements at the time of
delivery of long-term incentive compensation awards. Purchases of AB Holding Units reflected on the condensed consolidated
statements of cash flows are net of AB Holding Unit purchases by employees as part of a distribution reinvestment election.
Second Quarter 2017 Earnings Conference Call Information
Management will review Second Quarter 2017 financial and operating results during a conference call beginning at 8:00 a.m. (ET) on Thursday, July 27, 2017. The conference call will be hosted by Seth P. Bernstein, President and Chief Executive Officer, and John C.
Weisenseel, Chief Financial Officer.
Parties may access the conference call by either webcast or telephone:
- To listen by webcast, please visit AB's Investor Relations website at http://abglobal.com/corporate/investor-relations/home.htm at least 15 minutes prior to the call to download and
install any necessary audio software.
- To listen by telephone, please dial (866) 556-2265 in the U.S. or (973) 935-8521 outside the U.S. 10 minutes before the
scheduled start time. The conference ID# is 48330373.
The presentation management will review during the conference call will be available on AB's Investor Relations website
shortly after the release of Second Quarter 2017 financial and operating results on July 27, 2017.
AB will be providing live updates via Twitter during the conference call. To access the tweets, follow AB on Twitter:
@AB_insights. Also, in the future, AB may provide public disclosures to investors via Twitter and other appropriate
internet-based social media.
A replay of the webcast will be made available beginning approximately one hour after the conclusion of the conference call
and will be available on AB's website for one week. An audio replay of the conference call will also be available for one
week. To access the audio replay, please call (855) 859-2056 in the US, or (404) 537-3406 outside the US, and provide
the conference ID #: 48330373.
Cautions Regarding Forward-Looking Statements
Certain statements provided by management in this news release are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other
factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking
statements. The most significant of these factors include, but are not limited to, the following: the performance of financial
markets, the investment performance of sponsored investment products and separately-managed accounts, general economic
conditions, industry trends, future acquisitions, competitive conditions, and current and proposed government regulations,
including changes in tax regulations and rates and the manner in which the earnings of publicly-traded partnerships are taxed. AB
cautions readers to carefully consider such factors. Further, such forward-looking statements speak only as of the date on which
such statements are made; AB undertakes no obligation to update any forward-looking statements to reflect events or circumstances
after the date of such statements. For further information regarding these forward-looking statements and the factors that could
cause actual results to differ, see "Risk Factors" and "Cautions Regarding Forward-Looking Statements" in AB's Form 10-K for the
year ended December 31, 2016 and subsequent Forms 10-Q. Any or all of the forward-looking
statements made in this news release, Form 10-K, Forms 10-Q, other documents AB files with or furnishes to the SEC, and any other
public statements issued by AB, may turn out to be wrong. It is important to remember that other factors besides those listed in
"Risk Factors" and "Cautions Regarding Forward-Looking Statements", and those listed below, could also adversely affect AB's
financial condition, results of operations and business prospects.
The forward-looking statements referred to in the preceding paragraph include statements regarding:
- The pipeline of new institutional mandates not yet funded: Before they are funded, institutional mandates
do not represent legally binding commitments to fund and, accordingly, the possibility exists that not all mandates will be
funded in the amounts and at the times currently anticipated.
- The possibility that AB will engage in open market purchases of AB Holding Units to help fund anticipated
obligations under our incentive compensation award program: The number of AB Holding Units AB may decide to buy in future
periods, if any, to help fund incentive compensation awards is dependent upon various factors, some of which are beyond our
control, including the fluctuation in the price of a Holding Unit and the availability of cash to make these purchases.
Qualified Tax Notice
This announcement is intended to be a qualified notice under Treasury Regulation §1.1446-4(b). Please note that 100% of
AB Holding's distributions to foreign investors is attributable to income that is effectively connected with a United States trade or business. Accordingly, AB Holding's distributions to foreign investors are subject to
federal income tax withholding at the highest applicable tax rate, currently 39.6%.
About AB
AB is a leading global investment management firm that offers high-quality research and diversified investment services to
institutional investors, individuals and private wealth clients in major world markets.
As of June 30, 2017, AB Holding owned approximately 35.2% of the issued and outstanding AB Units
and AXA, a worldwide leader in financial protection, owned an approximate 64.6% economic interest in AB.
Additional information about AB may be found on our website, www.abglobal.com.
AB (The Operating Partnership)
|
|
|
|
|
|
|
US GAAP Consolidated Statement of Income (Unaudited)
|
|
|
|
|
|
|
(US $ Thousands)
|
2Q 2017
|
|
2Q 2016
|
|
2Q 2017 vs.
2Q 2016 %
Change
|
|
1Q 2017
|
|
2Q 2017 vs.
1Q 2017 %
Change
|
|
|
|
|
|
|
|
|
|
|
GAAP revenues:
|
|
|
|
|
|
|
|
|
|
Base fees
|
$
|
516,485
|
|
|
$
|
476,306
|
|
|
8.4
|
%
|
|
$
|
492,176
|
|
|
4.9
|
%
|
Performance fees
|
14,678
|
|
|
744
|
|
|
1,872.8
|
%
|
|
6,114
|
|
|
140.1
|
%
|
Bernstein research services
|
109,470
|
|
|
115,053
|
|
|
(4.9)
|
%
|
|
112,741
|
|
|
(2.9)
|
%
|
Distribution revenues
|
100,149
|
|
|
97,321
|
|
|
2.9
|
%
|
|
96,554
|
|
|
3.7
|
%
|
Dividends and interest
|
19,348
|
|
|
10,147
|
|
|
90.7
|
%
|
|
14,056
|
|
|
37.6
|
%
|
Investments gains (losses)
|
24,113
|
|
|
2,276
|
|
|
959.4
|
%
|
|
25,201
|
|
|
(4.3)
|
%
|
Other revenues
|
24,265
|
|
|
25,833
|
|
|
(6.1)
|
%
|
|
22,365
|
|
|
8.5
|
%
|
Total revenues
|
808,508
|
|
|
727,680
|
|
|
11.1
|
%
|
|
769,207
|
|
|
5.1
|
%
|
Less: interest expense
|
6,195
|
|
|
1,874
|
|
|
230.6
|
%
|
|
4,290
|
|
|
44.4
|
%
|
Total net revenues
|
802,313
|
|
|
725,806
|
|
|
10.5
|
%
|
|
764,917
|
|
|
4.9
|
%
|
|
|
|
|
|
|
|
|
|
|
GAAP operating expenses:
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits
|
327,862
|
|
|
309,249
|
|
|
6.0
|
%
|
|
321,748
|
|
|
1.9
|
%
|
Promotion and servicing
|
|
|
|
|
|
|
|
|
|
Distribution-related payments
|
102,756
|
|
|
93,217
|
|
|
10.2
|
%
|
|
96,367
|
|
|
6.6
|
%
|
Amortization of deferred sales commissions
|
8,307
|
|
|
10,577
|
|
|
(21.5)
|
%
|
|
9,079
|
|
|
(8.5)
|
%
|
Trade execution, marketing, T&E and other
|
53,235
|
|
|
55,357
|
|
|
(3.8)
|
%
|
|
48,214
|
|
|
10.4
|
%
|
General and administrative
|
|
|
|
|
|
|
|
|
|
General & administrative
|
117,462
|
|
|
109,757
|
|
|
7.0
|
%
|
|
114,221
|
|
|
2.8
|
%
|
Real estate (credits) charges
|
20,747
|
|
|
(2,801)
|
|
|
n/m
|
|
|
(2)
|
|
|
n/m
|
|
Contingent payment arrangements
|
178
|
|
|
353
|
|
|
(49.6)
|
%
|
|
177
|
|
|
0.6
|
%
|
Interest on borrowings
|
2,254
|
|
|
1,052
|
|
|
114.3
|
%
|
|
1,868
|
|
|
20.7
|
%
|
Amortization of intangible assets
|
6,975
|
|
|
6,470
|
|
|
7.8
|
%
|
|
6,933
|
|
|
0.6
|
%
|
Total operating expenses
|
639,776
|
|
|
583,231
|
|
|
9.7
|
%
|
|
598,605
|
|
|
6.9
|
%
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
162,537
|
|
|
142,575
|
|
|
14.0
|
%
|
|
166,312
|
|
|
(2.3)
|
%
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
10,265
|
|
|
13,231
|
|
|
(22.4)
|
%
|
|
10,057
|
|
|
2.1
|
%
|
|
|
|
|
|
|
|
|
|
|
Net income
|
152,272
|
|
|
129,344
|
|
|
17.7
|
%
|
|
156,255
|
|
|
(2.5)
|
%
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) of consolidated entities
attributable to non-controlling interests
|
17,169
|
|
|
4,843
|
|
|
254.5
|
%
|
|
16,318
|
|
|
5.2
|
%
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to AB Unitholders
|
$
|
135,103
|
|
|
$
|
124,501
|
|
|
8.5
|
%
|
|
$
|
139,937
|
|
|
(3.5)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AB Holding L.P. (The Publicly-Traded Partnership)
|
|
|
|
|
|
SUMMARY STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US $ Thousands)
|
2Q 2017
|
|
2Q 2016
|
|
2Q 2017 vs.
2Q 2016 %
Change
|
|
1Q 2017
|
|
2Q 2017 vs.
1Q 2017 %
Change
|
|
|
|
|
|
|
|
|
|
|
Equity in Net Income Attributable to AB Unitholders
|
$
|
47,947
|
|
|
$
|
44,657
|
|
|
7.4
|
%
|
|
$
|
49,666
|
|
|
(3.5)
|
%
|
Income Taxes
|
6,206
|
|
|
5,585
|
|
|
11.1
|
%
|
|
5,756
|
|
|
7.8
|
%
|
Net Income
|
41,741
|
|
|
39,072
|
|
|
6.8
|
%
|
|
43,910
|
|
|
(4.9)
|
%
|
|
|
|
|
|
|
|
|
|
|
Additional Equity in Earnings of Operating Partnership
(1)
|
137
|
|
|
189
|
|
|
(27.5)
|
%
|
|
176
|
|
|
(22.2)
|
%
|
Net Income - Diluted
|
$
|
41,878
|
|
|
$
|
39,261
|
|
|
6.7
|
%
|
|
$
|
44,086
|
|
|
(5.0)
|
%
|
Diluted Net Income per Unit
|
$
|
0.43
|
|
|
$
|
0.40
|
|
|
7.5
|
%
|
|
$
|
0.46
|
|
|
(6.5)
|
%
|
Distribution per Unit
|
$
|
0.49
|
|
|
$
|
0.40
|
|
|
22.5
|
%
|
|
$
|
0.46
|
|
|
6.5
|
%
|
|
|
|
|
|
|
|
|
|
|
(1) To reflect higher ownership in the Operating Partnership resulting from
application of the treasury stock method to outstanding options.
|
|
Units Outstanding
|
2Q 2017
|
|
2Q 2016
|
|
2Q 2017 vs.
2Q 2016 %
Change
|
|
1Q 2017
|
|
2Q 2017 vs.
1Q 2017 %
Change
|
AB L.P.
|
|
|
|
|
|
|
|
|
|
Period-end
|
265,714,086
|
|
|
268,777,653
|
|
|
(1.1)
|
%
|
|
268,714,548
|
|
|
(1.1)
|
%
|
Weighted average - basic
|
268,301,889
|
|
|
269,720,065
|
|
|
(0.5)
|
%
|
|
268,479,768
|
|
|
(0.1)
|
%
|
Weighted average - diluted
|
268,732,079
|
|
|
270,370,130
|
|
|
(0.6)
|
%
|
|
269,013,395
|
|
|
(0.1)
|
%
|
AB Holding L.P.
|
|
|
|
|
|
|
|
|
|
Period-end
|
93,503,142
|
|
|
96,534,649
|
|
|
(3.1)
|
%
|
|
96,473,204
|
|
|
(3.1)
|
%
|
Weighted average - basic
|
96,061,547
|
|
|
97,463,205
|
|
|
(1.4)
|
%
|
|
96,238,424
|
|
|
(0.2)
|
%
|
Weighted average - diluted
|
96,491,737
|
|
|
98,113,270
|
|
|
(1.7)
|
%
|
|
96,772,051
|
|
|
(0.3)
|
%
|
AllianceBernstein L.P.
|
|
|
ASSETS UNDER MANAGEMENT | June 30, 2017
|
|
|
($ billions)
|
|
|
Ending and Average
|
Three Months Ended
|
|
|
6/30/17
|
6/30/16
|
|
Ending Assets Under Management
|
$516.6
|
$489.5
|
|
Average Assets Under Management
|
$507.7
|
$484.5
|
|
|
|
|
|
|
|
|
Three-Month Changes By Distribution Channel
|
|
|
|
|
|
|
|
Institutions
|
|
Retail
|
|
Private Wealth
Management
|
|
Total
|
|
Beginning of Period
|
$
|
244.9
|
|
$
|
168.9
|
|
|
|
$
|
84.1
|
|
|
$
|
497.9
|
|
Sales/New accounts
|
4.0
|
|
13.5
|
|
|
2.9
|
|
|
20.4
|
|
Redemption/Terminations
|
(2.9)
|
|
(8.9)
|
|
|
(2.6)
|
|
|
(14.4)
|
|
Net Cash Flows
|
0.1
|
|
(1.4)
|
|
|
—
|
|
|
(1.3)
|
|
Net Flows
|
1.2
|
|
3.2
|
|
|
0.3
|
|
|
4.7
|
|
Investment Performance
|
6.8
|
|
5.2
|
|
|
2.0
|
|
|
14.0
|
|
End of Period
|
$
|
252.9
|
|
$
|
177.3
|
|
|
$
|
86.4
|
|
|
$
|
516.6
|
Three-Month Changes By Investment Service
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Active
|
|
Equity
Passive (1)
|
|
Fixed
Income
Taxable
|
|
Fixed
Income
Tax-Exempt
|
|
Fixed
Income
Passive (1)
|
|
Other (2)
|
|
Total
|
|
Beginning of Period
|
$
|
118.8
|
|
|
$
|
48.9
|
|
|
$
|
228.1
|
|
$
|
37.8
|
|
|
$
|
11.1
|
|
|
$
|
53.2
|
|
|
$
|
497.9
|
|
Sales/New accounts
|
5.2
|
|
|
0.1
|
|
|
10.6
|
|
2.1
|
|
|
—
|
|
|
2.4
|
|
|
20.4
|
|
Redemption/Terminations
|
(4.3)
|
|
|
(0.2)
|
|
|
(6.4)
|
|
(1.3)
|
|
|
(1.4)
|
|
|
(0.8)
|
|
|
(14.4)
|
|
Net Cash Flows
|
(0.3)
|
|
|
(0.4)
|
|
|
(0.6)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.3)
|
|
Net Flows
|
0.6
|
|
|
(0.5)
|
|
|
3.6
|
|
0.8
|
|
|
(1.4)
|
|
|
1.6
|
|
|
4.7
|
|
Investment Performance
|
5.1
|
|
|
1.7
|
|
|
4.9
|
|
0.6
|
|
|
0.2
|
|
|
1.5
|
|
|
14.0
|
|
End of Period
|
$
|
124.5
|
|
|
$
|
50.1
|
|
|
$
|
236.6
|
|
$
|
39.2
|
|
|
$
|
9.9
|
|
|
$
|
56.3
|
|
|
$
|
516.6
|
Three-Month Net Flows By Investment Service (Active versus
Passive)
|
|
|
Actively
Managed
|
|
Passively
Managed (1)
|
|
Total
|
|
|
Equity
|
$
|
0.6
|
|
|
$
|
(0.5)
|
|
|
$
|
0.1
|
|
|
|
Fixed Income
|
4.4
|
|
|
(1.4)
|
|
|
3.0
|
|
|
|
Other (2)
|
1.6
|
|
|
—
|
|
|
1.6
|
|
|
|
Total
|
$
|
6.6
|
|
|
$
|
(1.9)
|
|
|
$
|
4.7
|
|
|
(1)
|
Includes index and enhanced index services.
|
(2)
|
Includes certain multi-asset solutions and services and certain alternative
investments.
|
By Client Domicile
|
|
|
|
|
|
|
|
|
|
Institutions
|
|
Retail
|
|
Private
Wealth
|
|
Total
|
|
U.S. Clients
|
$
|
145.2
|
|
|
$
|
101.5
|
|
|
$
|
84.5
|
|
|
$
|
331.2
|
|
|
Non-U.S. Clients
|
107.7
|
|
|
75.8
|
|
|
1.9
|
|
|
185.4
|
|
|
Total
|
$
|
252.9
|
|
|
$
|
177.3
|
|
|
$
|
86.4
|
|
|
$
|
516.6
|
|
AB L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF GAAP FINANCIAL RESULTS TO ADJUSTED FINANCIAL
RESULTS
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
US $ Thousands, unaudited
|
6/30/2017
|
|
3/31/2017
|
|
12/31/2016
|
|
9/30/2016
|
|
6/30/2016
|
|
3/31/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenues, GAAP basis
|
$
|
802,313
|
|
|
$
|
764,917
|
|
|
$
|
786,256
|
|
|
$
|
747,591
|
|
|
$
|
725,806
|
|
|
$
|
769,126
|
|
|
|
Exclude:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term incentive compensation-related investment (gains)
losses
|
(1,926)
|
|
|
(2,979)
|
|
|
846
|
|
|
(2,556)
|
|
|
(792)
|
|
|
1,326
|
|
|
|
Long-term incentive compensation-related dividends and
interest
|
(150)
|
|
|
(158)
|
|
|
(1,212)
|
|
|
(142)
|
|
|
(142)
|
|
|
(151)
|
|
|
|
Distribution-related payments
|
(102,756)
|
|
|
(96,367)
|
|
|
(95,419)
|
|
|
(95,844)
|
|
|
(93,217)
|
|
|
(87,127)
|
|
|
|
Amortization of deferred sales commissions
|
(8,307)
|
|
|
(9,079)
|
|
|
(9,460)
|
|
|
(9,787)
|
|
|
(10,577)
|
|
|
(11,242)
|
|
|
|
Pass-through fees & expenses
|
(9,701)
|
|
|
(10,407)
|
|
|
(10,682)
|
|
|
(9,768)
|
|
|
(11,708)
|
|
|
(11,651)
|
|
|
|
Gain on sale of investment carried at cost
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(75,273)
|
|
|
|
Gain on sale of software technology
|
(4,231)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Impact of consolidated company-sponsored investment
funds
|
(25,701)
|
|
|
(22,155)
|
|
|
(8,360)
|
|
|
(16,114)
|
|
|
(5,471)
|
|
|
5,058
|
|
|
Adjusted Net Revenues
|
$
|
649,541
|
|
|
$
|
623,772
|
|
|
$
|
661,969
|
|
|
$
|
613,380
|
|
|
$
|
603,899
|
|
|
$
|
590,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income, GAAP basis
|
$
|
162,537
|
|
|
$
|
166,312
|
|
|
$
|
222,239
|
|
|
$
|
185,309
|
|
|
$
|
142,575
|
|
|
$
|
173,042
|
|
|
|
Exclude:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term incentive compensation-related items
|
417
|
|
|
68
|
|
|
(252)
|
|
|
363
|
|
|
(354)
|
|
|
963
|
|
|
|
Gain on sale of investment carried at cost
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(75,273)
|
|
|
|
Gain on sale of software technology
|
(4,231)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Real estate (credits) charges
|
20,747
|
|
|
(2)
|
|
|
(6,941)
|
|
|
(140)
|
|
|
(2,801)
|
|
|
27,586
|
|
|
|
Acquisition-related expenses
|
25
|
|
|
524
|
|
|
514
|
|
|
303
|
|
|
239
|
|
|
—
|
|
|
|
Contingent payment arrangements
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,483)
|
|
|
—
|
|
|
—
|
|
|
|
Sub-total of non-GAAP adjustments
|
16,958
|
|
|
590
|
|
|
(6,679)
|
|
|
(20,957)
|
|
|
(2,916)
|
|
|
(46,724)
|
|
|
|
Less: Net (loss) income of consolidated entities attributable
to non-controlling interests
|
17,169
|
|
|
16,318
|
|
|
6,697
|
|
|
15,696
|
|
|
4,843
|
|
|
(5,748)
|
|
|
Adjusted Operating Income
|
$
|
162,326
|
|
|
$
|
150,584
|
|
|
$
|
208,863
|
|
|
$
|
148,656
|
|
|
$
|
134,816
|
|
|
$
|
132,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Margin, GAAP basis excl. non-controlling interests
|
18.1
|
%
|
|
19.6
|
%
|
|
27.4
|
%
|
|
22.7
|
%
|
|
19.0
|
%
|
|
23.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Margin
|
25.0
|
%
|
|
24.1
|
%
|
|
31.6
|
%
|
|
24.2
|
%
|
|
22.3
|
%
|
|
22.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AB Holding L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF GAAP EPU TO ADJUSTED EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
$ Thousands except per Unit amounts, unaudited
|
6/30/2017
|
|
3/31/2017
|
|
12/31/2016
|
|
9/30/2016
|
|
6/30/2016
|
|
3/31/2016
|
|
Net Income - Diluted, GAAP basis
|
$
|
41,878
|
|
|
$
|
44,086
|
|
|
$
|
72,963
|
|
|
$
|
50,479
|
|
|
$
|
39,261
|
|
|
$
|
54,745
|
|
|
Impact on net income of AB non-GAAP adjustments
|
5,637
|
|
|
197
|
|
|
(9,761)
|
|
|
(6,953)
|
|
|
(949)
|
|
|
(15,686)
|
|
|
Adjusted Net Income - Diluted
|
$
|
47,515
|
|
|
$
|
44,283
|
|
|
$
|
63,202
|
|
|
$
|
43,526
|
|
|
$
|
38,312
|
|
|
$
|
39,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Net Income per Holding Unit, GAAP basis
|
$
|
0.43
|
|
|
$
|
0.46
|
|
|
$
|
0.77
|
|
|
$
|
0.52
|
|
|
$
|
0.40
|
|
|
$
|
0.55
|
|
|
Impact of AB non-GAAP adjustments
|
0.06
|
|
|
—
|
|
|
(0.10)
|
|
|
(0.07)
|
|
|
(0.01)
|
|
|
(0.16)
|
|
|
Adjusted Diluted Net Income per Holding Unit
|
$
|
0.49
|
|
|
$
|
0.46
|
|
|
$
|
0.67
|
|
|
$
|
0.45
|
|
|
$
|
0.39
|
|
|
$
|
0.39
|
|
AB
Notes to Consolidated Statements of Income and Supplemental Information
(Unaudited)
Adjusted Net Revenues
Adjusted net revenues exclude investment gains and losses and dividends and interest on employee long-term incentive
compensation-related investments. In addition, adjusted net revenues offset distribution-related payments to third parties as
well as amortization of deferred sales commissions against distribution revenues. We believe offsetting net revenues by
distribution-related payments is useful for our investors and other users of our financial statements because such presentation
appropriately reflects the nature of these costs as pass-through payments to third parties who perform functions on behalf of our
sponsored mutual funds and/or shareholders of these funds. We offset amortization of deferred sales commissions against net
revenues because such costs, over time, essentially offset our distribution revenues. We also exclude additional pass-through
expenses we incur (primarily through our transfer agency) that are reimbursed and recorded as fees in revenues. These fees do not
affect operating income, but they do affect our operating margin. As such, we exclude these fees from adjusted net revenues.
We adjust for the revenue impact of consolidating company-sponsored investment funds by eliminating the consolidated
company-sponsored investment funds' revenues and including AB's fees from such consolidated company-sponsored investment funds
and AB's investment gains and losses on its investments in such consolidated company-sponsored investment funds that were
eliminated in consolidation. Lastly, in the second quarter of 2017 we excluded a gain of $4.2
million on the exchange of software technology for an ownership interest in a third party company and in the first quarter
of 2016 we excluded a realized gain of $75.3 million resulting from the liquidation of an
investment in Jasper Wireless Technologies, Inc. ("Jasper"), which was acquired by Cisco Systems, Inc., because these
transactions are not part of our core operating results.
Adjusted Operating Income
Adjusted operating income represents operating income on a US GAAP basis excluding (1) the impact on net revenues and
compensation expense of the investment gains and losses (as well as the dividends and interest) associated with employee
long-term incentive compensation-related investments, (2) the gain on the sale of our investment in Jasper during 2016, (3) the
gain on the sale of software technology during 2017 (4) real estate charges (credits), (5) acquisition-related expenses, (6)
adjustments to contingent payment arrangements, and (7) the impact of consolidated company-sponsored investment funds.
Prior to 2009, a significant portion of employee compensation was in the form of employee long-term incentive compensation
awards that were notionally invested in AB investment services and generally vested over a period of four years. AB economically
hedged the exposure to market movements by purchasing and holding these investments on its balance sheet. All such investments
had vested as of year-end 2012 and the investments have been delivered to the participants, except for those investments with
respect to which the participant elected a long-term deferral. Fluctuation in the value of these investments is recorded within
investment gains and losses on the income statement and also impacts compensation expense. Management believes it is useful to
reflect the offset achieved from economically hedging the market exposure of these investments in the calculation of adjusted
operating income and adjusted operating margin. The non-GAAP measures exclude gains and losses and dividends and interest on
employee long-term incentive compensation-related investments included in revenues and compensation expense.
A realized gain on the liquidation of our Jasper investment during 2016 has been excluded due to its non-recurring nature and
because it is not part of our core operating results.
A realized gain on the exchange of software technology for an ownership interest in a third party company during 2017 has been
excluded due to its non-recurring nature and because it is not part of our core operating results.
Real estate charges (credits) have been excluded because they are not considered part of our core operating results when
comparing financial results from period to period and to industry peers.
Acquisition-related expenses have been excluded because they are not considered part of our core operating results when
comparing financial results from period to period and to industry peers.
The recording of changes in estimates of the contingent consideration payable with respect to contingent payment
arrangements associated with our acquisitions are not considered part of our core operating results and, accordingly, have been
excluded.
We adjusted for the operating income impact of consolidating certain company-sponsored investment funds by eliminating the
consolidated company-sponsored investment funds' revenues and expenses and including AB's revenues and expenses that were
eliminated in consolidation. We also excluded the limited partner interests we do not own.
Adjusted Operating Margin
Adjusted operating margin allows us to monitor our financial performance and efficiency from period to period without the
volatility noted above in our discussion of adjusted operating income and to compare our performance to industry peers on
a basis that better reflects our performance in our core business. Adjusted operating margin is derived by dividing adjusted
operating income by adjusted net revenues.
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SOURCE AllianceBernstein